10 steps to avoid employee lawsuits

Hans Nilges

Small business owners often expose themselves to employee legal action simply through lack of awareness about federal, state and local labor regulations. Restaurant operators can help reduce the likelihood of a lawsuit by proactively establishing consistent, legally sound employment practices. Before developing those practices, consider the following steps:

1.  Review your tip-pooling practices.

• Employees must be permitted to retain all of their tips, except to the extent that they participate in a valid "tip pooling" arrangement.

• Tips may be pooled and shared among employees who "customarily and regularly" receive more than $30 per month in tips.

• Tips may not be shared with employees who do not "customarily and regularly" receive tips (e.g., dishwashers, cooks, etc.)

• All tipped employees must receive at least a minimum wage, including the cash wage requirement and tips received from the pool or otherwise.

• Employees must be informed of their tip pool contribution requirements.

2.  Review your medical leave obligations.

•Is your company required to provide FMLA leave?

• All employers with 50 or more employees (including everybody appearing on the payroll (part time, full time, those on leave, etc. and temporary employees) must provide 12 weeks of FMLA leave to eligible employees for certain serious medical conditions.  Examples include conditions that last more than three days and involve treatment from a health care provider or chronic conditions that requirement treatment twice a year.

• A common mistake is failure to count temporary employees, those on leave, part-timers and so on.

• Eligible employees include those who have worked for at least 12 months (which need not be consecutive) and worked 1,250 hours in the 12-month period immediately preceding the leave.

• Certain formal written notices must be provided to employees who have informed employers of a need for leave to address a serious medical condition. These include providing written notice of eligibility for leave and information requiring the employee's rights and responsibilities in connection with the leave.  Employees must also be notified any time that leave is designated as FMLA leave.

• Failure to provide these notices is a violation of the law.  Likewise, improperly denying leave is a violation of the law.

3.  Make sure there is no "off the clock" work.

• Supervisors often feel the pressure to meet payroll budgets and therefore will require employees to clock out, but still continue working.

• Likewise, dedicated employees will often voluntarily clock out and continue working to help out.

• Both practices are violations of the law and can result in overtime and/or minimum wage claims.

4.  Promptly investigate claims of harassment.

• All claims of harassment of any type should be taken very seriously and immediately and thoroughly invested.

• This includes interviewing and taking statements from all involved parties and witnesses.

• Only make a disciplinary decision after the investigation is complete. In some circumstances, it may be appropriate to suspend the alleged harasser pending investigation.  If the alleged harasser is salaried and classified as exempt, the suspension should be with pay. The suspension may be either with or without pay for nonexempt employees.

• The employment decision, including the reasons for the decision, should be documented and communicated to the alleged harasser.

• Always consult with legal counsel.

5. Make sure your managers are really exempt from overtime and minimum wage requirements.

• Just because an employee is paid on a salary basis does not mean they are exempt from overtime requirements.

• Certain minimum standards must be met. For example, employees are only considered an "exempt" executive if:  (1) they are paid a salary (not hourly wage) of at least $455 per week; (2) their primary duty is management; (3) they have the ability to discipline or terminate employees, or their recommendations regarding such issues must be given particular weight; and (4) they supervise two or more full-time employees or the equivalent.

• Common mistakes include assuming that people provided some management-like duties (e.g., some paperwork responsibilities) who have a management title are exempt.  Job titles or job descriptions do not determine who is exempt. Rather, management must be the most important part of the person's job.

• Another common mistake is assuming that assistant managers who share supervisory responsibility of a defined unit of employees are exempt. Employees who merely share supervisory responsibility of the same employees will not meet the exemption and must be paid a minimum wage and overtime.

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6.  Ensure no improper salary deductions are being made.

• Exempt employees paid on a salary basis must receive that entire salary, with few exceptions.

• Only a few deductions from salary are permissible.  For example, a deduction may be made for a whole day off taken for a personal reason.

• Common mistakes include making a deduction from salary for a partial-day absence.

• Another common mistake is docking an employee's pay for cash shortages.

7.  Understand your obligations to provide reasonable accommodations for certain medical conditions.

• The Americans with Disabilities Act (ADA) requires that persons with disabling medical conditions be provided with a reasonable accommodation to help them perform the essential functions of their position.

• This obligation is triggered when an employee requests such an accommodation. For example, an employee might complain that her medical condition prevents her from performing a certain aspect of her job.

• Once informed of the need for an accommodation, the employer and the employee must engage in an interactive process to determine an appropriate accommodation.

• One common mistake is that employers will deny unpaid leave as an accommodation for a medical condition, and automatically terminate an employee who requires time off to address the medical condition.

8.  Avoid "100 percent healed" requirements for return to work.

• Some employers will require employees returning to work from a medical leave to be "100 percent healed" or return with no restrictions.

• This type of policy violates the law in several ways. For example, such a policy does not contemplate engaging in the interactive process required to determine an appropriate reasonable accommodation. Likewise, the policy assumes that the person is disabled, even if they could perform all of the essential functions of the job.

9. Put all policies in writing.

• Having written policies in place is an essential risk management strategy.

• Certain written policies provide employers with legal defenses in the event of a lawsuit.

• For example, a reporting policy for wage and hour violations could prevent a million-dollar judgment in an overtime lawsuit.

• Failure to have policies in place will result in the employer being deprived of important legal defenses.

10.  Train your supervisors and managers.

• Legal risk management is not always clear-cut. Sometimes doing the right thing legally is counterintuitive or not in line with the most efficient business decision.

• Failure to comply with the law, however, can result in million-dollar lawsuits.

• Supervisors who do not know the law will inevitably violate it.

Hans Nilges is a partner with Nilges Draher, LLC, a Canton, OH-based firm specializing in labor law.